Interest rate risk How is there no investor risk statement in relation to interest rates in the annual information form?
There is more debt than cash on the balance sheet.
The interest and principal payments double every year until the balloon payment is due in 2026.
They do not have the cash flow to pay all their commitments until then. They will be very short.
And, worse, the revenue is also dependent on interest rates. All of the government contracts are long term in nature and rely on governments issuing debt. So they have interest rate risk on the balance sheet. And then they have double exposure with revenues tied to long term interest rates from government purchases.
A classic pro cyclical business that had no business trading at 15-20X multiples. Pro cyclical businesses like this typically trade at 5-8X. Exactly what Align Capital paid for it.